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Business Management. Unit 1 1.2 Why do businesses exist?. UNIT 1.2 Why do businesses exist?. In this Unit you will find out about: Reasons why businesses exist – enterprise, profit, charity, public sector Entrepreneurship The risks faced by businesses - PowerPoint PPT Presentation
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Business Management
Unit 11.2 Why do businesses exist?
2
UNIT 1.2 Why do businesses exist?
In this Unit you will find out about: Reasons why businesses exist – enterprise,
profit, charity, public sector Entrepreneurship The risks faced by businesses Aims of different business organisations Costs and benefits of business Stakeholders – who are they? Impact of business on the community
3
Why businesses exist?
Businesses exist for a variety of reasons:
Enterprise – to develop a good idea
Profit – To make a profit eg ASDA
Charity – to raise money for a suitable cause eg Comic Relief
Public Service – to provide a service to the community at large eg NHS, Schools
4
What is enterprise? – “to boldly go”
Enterprise includes:
Turning a good idea into a business success Seeing a chance and taking it – making a success of it Seeing a better way of doing something
People setting up business for these reasons tend to enjoy thechallenge and excitement of seeing their idea work.
NB you do not need to be a sole trader to be enterprising – people
can be enterprising in the private, public or voluntary sector.
5
How do businesses make a profit?
Private businesses are set up to make a profit over a
period of time and they do this by:
Selling goods to customer at a price which is more than it cost them to provide the goods or services
Sales income – Cost of sales = Profit
6
What is a Charity?
A charity is a form of organisation where a group ofpeople work together to support and help others.
Fundsare raised in a variety of ways and used to improve
theliving conditions or life of others.
Examples of charities are:Comic ReliefARMSSave the Children
7
What is meant by Public Service?
Public Service organisations provide some kind of help
or service to the general public.
Examples of public service are:NHSLocal government services such as roads, libraries, educationNational government services such as the police or defence
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What is an ENTREPRENEUR?
An Entrepreneur is someone who
Has an idea for a business venture Is prepared to take another’s idea and develop it Is prepared to provide finance to develop an idea Is prepared to take a risk which will in turn result
in a new produce or service
This is called enterprise
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What skills and qualities does an entrepreneur need
An Entrepreneur needs the following skills and qualities:
Is creative and energetic Has enthusiasm for the task Will use their own initiative Will take risks Is assertive Is a decision maker Can handle different aspects of the business Is a problem solver
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Who are the entrepreneurs?
Richard Branson Linda Bennett Michelle Moan
Dragon’s Den team: Deborah Meaden Duncan Bannatyne Peter Jones James Caan Theo Paphitis
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What risks face a new business?
Any new business will face risks and these include:
People not buying the product or service Profits not high enough to cover the costs in the
long term Problems with cash flow – not enough income to
cover expenses More money owed to suppliers that can be paid
back in the long term All money which has been invested is lost.
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What are the aims of businesses?
The aims of any business can be complex and depend on
many factors:
The type of business activity Personality of the owner/manage The sector of industry in which it operates The level of competition
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A businesses aims may include:
Whether it wants to
make a profit? be recognised for providing a quality service expand internationally become environmentally friendly improve conditions for its workforce increase its market share make customers happy develop employees
In general terms most businesses aim to achieve some
or all of the following:
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To beat competitors and gain more customers, therefore more profit
INCREASE MARKET SHARE
To make as much profit as possible
MAXIMISE PROFITS
To increase the size of the business eg more customers, more outlets
GROWTH
to make sure that the businesses does not fail or go out of business
SURVIVAL
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To produce quality products/services
QUALITY
To make their company/organisation the number one – a trailblazer
LEAD THE FIELD
To make sure that things are done in the best possible wah
EFFICIENCY
To have charitable aims tohelp others
IMPROVE CONDITIONS
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The aims and objectives of different types of business
help people improve the quality of service offered cut costs raise revenue to develop employees
Public sectororganisationn eg, National Health Service
help people maximize collections for cash offer a service to the community recruit more helpers open more branches/charity shops widen the scope of assistance
Charity, eg BritishRed Cross
survival – break-even maximize profits increase returns to shareholders/owners expand the product/service range expand the business – more outlets improve the quality of products/service
Private sector –profit-makingcompany, eg BT
AIMS/OBJECTIVESTYPE OF BUSINESS
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What are the benefits and costs of business?
These can be divided into 2 sections:
Social benefits and costs and
Economic benefits and costs
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Social Benefits and Costs
Social benefits:
These are the positive things which happen to a community because
of local businesses - Eg – better roads, improved housing, new schools
Social Costs
These are the negative effects on a community caused by somelocal businesses -Eg air/noise/water pollution, heavy traffic, health problems,
inconvenience arising from building works or redevelopment
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Economic Benefits and Costs
Economic benefits:
These are the positive monetary effects on a community caused bysome local businesses - Eg – increased income for local people because of local jobs, leadingto increased spending in other businesses which helps them. The standard of living is raised in the local area
Economic Costs
These are the increased community taxes on property leading to -Eg increased expenditure on the local infrastructure
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CASE STUDY
Turn to page 14 in your text bookRead the case study carefullyAnswer the questions in you jotter
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WHO ARE THE STAKEHOLDERS?
STAKEHOLDERS are people with any interest or an influence on an organisation.
They may be: People with no financial interest eg
environmental groups People with financial interest eg shareholders or
employees
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STAKEHOLDERS
Stakeholders can be:
MANAGERS of the firm INLAND REVENUE EMPLOYEES of the firm SHAREHOLDERS of the firm SUPPLIERS to the firm
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STAKEHOLDERS WILL BE INTERESTED IN
getting paid for supplying goods the reputation of the business for paying on time
SUPPLIERS
ensuring that the business performs well and increases the value of their investment – protecting their investment
SHAREHOLDERS
the activity of the business – the business pays their wages
EMPLOYEES
the activities of the business to make sure that tax rules are applied
INLAND REVENUE
running the businessMANAGERS
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STAKEHOLDERS IN A FOOTBALL CLUB (plc)
Top class player can bring inSponsorship and publicity for club
Win games Build good
reputation for club Increase income,
sponsorship etc
Players
Encourage higher ticket pricesLower running costsVote at AGM
Share of profitsMaximise profitsSee club progress in appropriate leagueWin games
Shareholders
Possible influencesPossible interestsStakeholders
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STAKEHOLDERS IN A FOOTBALL CLUB (plc)
Popularity of sportPay for televising events thus making clubs moneyMedia coverage can affect outcomes
Provide info for fans and therefore increase listeners
Raised income from advertising
Media
Influenc direction of clubNeed to balance profit. Growth of club with fans’ needs
Ensure long term success of clubMake healthy profit
Directors
Possible influencesPossible interestsStakeholders
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STAKEHOLDERS IN A FOOTBALL CLUB (plc)
Fans associations can discuss matters of interest and influence running of club
Attending matches State of ground Players’ skills Efficiency of
management
Fans
Local residents want minimised disruption to local areaMay complain to authoritiesMay not attend matches
Social cost of large stadium nearby – fans behaviour large crowdsIncreased trade in pubs, shops on match daysCommunity sports projects run by club
Local Residents
Possible influencesPossible interestsStakeholders
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